5 Ways to Ace Your Vacation Rental Pricing Strategy in 2022
Inconsistency can be difficult to get comfortable with. But, when setting your vacation rental prices, consistency should never be your aim.
But constantly setting and resetting prices is a huge operational task that eats up a lot of time. That’s why vacation rental property owners need all the tips and automation tools they can get their hands on.
To take the legwork out of discovering exactly what those tips are, we’ve put together this guide that features the top five ways you can upgrade your vacation rental pricing strategy today.
Strategic pricing is key to maximizing vacation rental revenue—but it’s not the only way.
RueBaRue enables you to drive revenue by letting guests extend their stays and promoting direct rebookings. To see how it works, book a demo now.
5 ways to upgrade your vacation rental pricing strategy in the New Year
Starting on the right foot helps set the tone for the rest of the year. As a vacation rental owner, now is the best time to start optimizing your vacation rental pricing strategy. Here are five ways you can get started today.
1. Use a dynamic pricing tool
Dynamic pricing software tools help vacation rental owners optimize and adjust their nightly rates according to supply and demanrrmnmnrtgr
These tools analyze relevant market data, such as day of the week, competition, seasonality, current demand, and local events to set optimum prices using algorithms. Leveraging this data allows them to align rates with real-time customer demand.
If you already set different prices for high season and low season, you’re already dabbling in dynamic pricing. But don’t stop there. Today’s market conditions, where supply often outweighs demand, mean that dynamic pricing is an essential—not optional—tool in your arsenal.
Your pricing strategy should never be based on guesswork. Dynamic pricing enables you to set automated, data-driven prices according to market fluctuation. And since gaps in your bookings can dramatically affect your bottom line, dynamic pricing tools generate automatic discounts to incentivize bookings on those gap days.
There are several dynamic pricing tools available for vacation rental owners:
- Beyond: A revenue management software that makes price recommendations based on demand. As well as dynamic pricing features, the tool also offers insights, OTA syncing, a website builder, and a booking engine.
- Wheelhouse: Allows you to customize settings such as minimum price and stay, last-minute discounts, and weekend rate adjustments, and offers specific plans for full and part-time rental owners. There’s also a dashboard with real-time insights and helps you track performance data to further optimize your pricing strategy.
- PriceLabs: Recommends prices based on forecasting and market supply and demand, including seasonal and day of the week trends, local events, and the number of days left to book. PriceLabs also analyzes local and historical data and offers several customization options such as dynamic minimum stays and last-minute discounts.
2. Be proactive, but also be ready to react quickly to changes in demand
Due to the nature of the vacation rental industry, proactive pricing isn’t always possible. But being able to react rapidly to changes in demand is crucial.
This doesn’t just mean being aware of seasonal demand—these are fluctuations that are expected year after year. Sudden, unexpected changes in vacation rental market demand can have a huge impact on your rental income. And, as we’re still living in “uncertain times”, it’s more important than ever to be on the ball.
Although historical performance data is useful, you also need to be ready for what the next day, week, and month will bring, so you’ll need to be ready to react to unexpected fluctuations and peaks in demand.
Here are a few examples of when you should consider increasing your rates:
- When events are being held in your local area (festivals, sporting events, concerts, etc)
- Annual and public holidays
- Regional fluctuations (peak seasons for skiing, beach, fishing, etc)
But, as we’ve seen over the past year, peaks in demand have had a direct correlation to country/state/regional rules regarding the pandemic. For example, when governments announced that lockdowns were going to be lifted on a certain date, bookings started suddenly pouring in.
That's why it's good to constantly monitor demand and your occupancy and adjust your prices accordingly.
3. Keep a close eye on your competition
Periodically checking the prices of similar vacation rental properties in your area helps you to assess current demand.
Every industry keeps an eye on what its competitors are doing. However, since a property’s amenities and features impact how guests perceive the property's value (which in turn impacts its pricing!), it’s important to make sure that the properties you compare with are actually similar to yours.
Furthermore, it’s likely that many of the rentals in your area are professionally managed. And, because large property management companies have revenue management teams, sophisticated pricing models, and access to lots of data, you can gain an advantage by looking at the way they’re pricing their rental properties. Plus, you’re also making sure that you’re pricing yours competitively.
Remember that under or over-pricing your rental property in comparison to your competition may mean that you establish yourself in a certain light—either as a budget option or a premium option in your category. However, beware that this will impact your occupancy rates and revenue. In most cases, competitive pricing is your safest bet.
4. Stay on top of your booking window/lead time
Don’t get complacent—guests are already starting to think about their 2022 vacations.
In fact, guests are planning on booking their 2022 vacations much further ahead of time than in 2020 and 2021. Almost 60% of respondents to an Evolve Survey said that they plan on booking trips in 2022 two to five months in advance.
This means that as well as focusing on gaps in bookings, you should consider offering early-bird discounts to lock in early bookings—which will also encourage more direct bookings.
Then, as the date approaches, consider lowering your rental prices. Getting a booking at a slightly lower price is better than not getting a booking at all and leaving your short-term rental empty!
5. Offer a flexible cancellation policy
Giving potential guests the safety net of a flexible cancellation policy is an important part of your vacation rental pricing strategy.
In fact, lenient cancellation policies are essential in today’s climate. Some guests will be willing to pay higher rates if they have the security of canceling their booking free of charge. Because of this, you can gain an advantage over rentals with more restrictive cancellation policies and charge more for listings with flexible cancellations.
However, be sure that your policy explicitly details how cancellations should be made, how many days before check-in a cancellation can be made, and how much (if any) money would be owed if a booking is canceled.
Two bonus tips on how to boost your vacation rental revenue in 2022
A well-crafted pricing strategy will help you boost your vacation rental revenue—but did you know that how well you manage the guest communication cycle also has an impact?
Below, we go through two extra tips to help you maximize your vacation rental income throughout the guest communication cycle.
Increase repeat direct bookings
Increasing direct bookings is one thing, but how do you increase repeat direct bookings?
RueBaRue, the end-to-end guest communication tool can help you collect email addresses and nurture guests with tailored communications. This will encourage them to keep coming back and booking directly with you instead of using OTAs.
For example, using the scheduler tool, you can utilize SMS and email templates for every occasion. From pre-arrival and post-arrival emails to pre-departure and thank you note emails, RueBaRue’s customizable templates help you personalize each one to each guest and offer guests incentives (discounts on future stays or special service) to keep them coming back for more.
Soon, you’ll even be able to use RueBaRue to automatically message guests on their birthdays and/or on holidays and offer them discounts to drive direct bookings.
Guest data is your best friend. It allows you to establish relationships, optimize guest experiences, and also reduce the time spent on guest communication by half.
Preview of RueBaRue's SMS and email scheduler.
Increase your occupancy rates by upselling late check-outs and early check-ins
Vacant nights mean no rental revenue. Extending guest stays is another effective way to boost rental income.
Extending guest stays –either with late check-outs or early check-ins—increases vacation home occupancy rates, reduces costs (because of fewer cleaning turnarounds!), and you’ll need fewer bookings to meet your revenue goals.
RueBaRue has its own extend guest stays feature—that most vacation rental tools don’t offer—makes it easy for you to see exactly where you have vacancies and gaps in your calendar using a color-coded system, allows you to select dates and guests, and then enables you to send messages directly to the selected guests to offer them a few extra, discounted nights.
Preview of RueBaRue's extend guest stays feature.
How to build an effective pricing strategy for vacation rentals
Demand is never static, and neither should your prices be!
Upgrading your vacation rental pricing strategy can have a dramatic effect on your bottom line. And although crafting the perfect pricing strategy takes time, there are ways of automating and refining the process to make sure you’re doing everything you can to boost income and occupancy rates and make stellar pricing decisions.
Remember, there are five ways to upgrade your vacation rental pricing strategy and find your sweet spot:
- Using a dynamic pricing tool as a starting point
- Being proactive, but also ready to react quickly to changes in demand
- Keeping a close eye on the competition
- Staying on top of booking window/lead time
- Offering a flexible cancellation policy
Now that you know how to adjust your prices efficiently, don’t neglect your guest relationships! With RueBaRue, you can drive revenue by upselling late check-outs and promoting direct rebookings. To see how it works, book a demo now.
Frequently asked questions about vacation rental pricing strategies
What is dynamic pricing for vacation rentals?
Dynamic pricing for vacation rental properties is a method of adjusting rates according to supply and demand and other relevant market data, such as day of the week, competition, seasonality, current demand, and local events. This helps property managers set flexible, customized prices for different nights to help boost occupancy rates and maximize revenue.
What is the difference between dynamic pricing and seasonal pricing?
Seasonal pricing is based on deviating from your standard prices during certain times of the year. Dynamic pricing analyzes seasonality as well as many other factors, including the day of the week, competition, seasonality, current demand, and local events to adjust and optimize vacation rental rates.
How do I choose the best dynamic pricing tool?
Most dynamic pricing tools have similar features. The best tool will depend on your unique needs, so be sure to compare pricing structures and the tools they integrate with.
What is the best vacation rental pricing strategy?
The best vacation rental pricing strategy relies on dynamic pricing since it accounts for the fluctuation in demand according to several important and decisive factors.
Why is it important to have a vacation rental pricing strategy?
A vacation rental pricing strategy helps you maximize rental income and enables you to remain competitive throughout both the peak and off-season by customizing rates in line with customer demand.
RueBaRue is much more than a guest communication tool. We’re adding new owner communication functionalities to our platform, so you can build lasting relationships with your owners. To see how it works, book a demo now.
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